Configured Internet Explorer (version 7) on the domain controller, 'DC' as per the instructions given for single sign on operation

Created user 'beawin'
Reset password for 'beawin to 'password'
Selected 'Use DES encryption types for this account' and ensured everything else was unticked
Reset password again for 'beawin to 'password'

Error 401--Unauthorized
From RFC 2068 Hypertext Transfer Protocol -- HTTP/1.1:
10.4.2 401 Unauthorized
The request requires user authentication. The response MUST include a WWW-Authenticate header field (section 14.46) containing a challenge applicable to the requested resource. The client MAY repeat the request with a suitable Authorization header field (section 14.8). If the request already included Authorization credentials, then the 401 response indicates that authorization has been refused for those credentials. If the 401 response contains the same challenge as the prior response, and the user agent has already attempted authentication at least once, then the user SHOULD be presented the entity that was given in the response, since that entity MAY include relevant diagnostic information. HTTP access authentication is explained in section 11.